The annual accounts have been prepared in accordance with the provisions of the Norwegian Accounting Act and with generally accepted accounting principles.
Management has used estimates and assumptions that have affected the income statement and the valuation of assets and liabilities, as well as uncertain assets and obligations on the date of balance in the preparation of the annual accounts in accordance with good accounting practice.
Foreign exchange transactions are calculated at the exchange rate prevailing at the time of the transaction. Monetary items in foreign currency are converted to Norwegian kroner by using the rate of exchange on the balance date. Non-monetary items which are measured at historical exchange rates expressed in foreign currency are converted to Norwegian kroner by using the exchange rate at the time of transaction. Non-monetary items which are measured at fair value expressed in foreign currency are converted to the exchange rate determined at the time of measurement. Exchange rate changes are entered on the income statement as they occur during the accounting period under other financial items.
The operating revenues consist mainly of division of joint costs among the subsidiaries. Sales are invoiced as the services occur.
Tax costs consist of payable tax and changes in deferred tax. Deferred tax/tax benefits are calculated on all differences between book and taxable values of assets and liabilities. Deferred tax is calculated at 23 % of the temporary differences between the book and taxable values, as well as tax losses carried forward at the end of the reporting year. Net deferred tax benefits are entered on the balance sheet to the extent that it is probable they can be utilised.
Payable tax and deferred tax are entered directly against equity to the extent that the tax entries relate to equity items.
Current assets and short-term debt include items which become due for payment within a year after the date of acquisition and items associated with the goods cycle. Other items are classified as fixed assets/long-term liabilities.
Current assets are valued at the lower of acquisition cost and fair value. Short-term debt is recognised on the balance sheet at the nominal amount at the time it is taken out.
Fixed assets are measured at acquisition cost, less depreciations and write downs. Long-term debt is recognised in the balance sheet at the nominal amount at the time of establishment.
Research and development expenses are entered on the balance sheet to the extent to which a future financial benefit can be identified that is linked to the development of an identifiable intangible asset and the expenses can be reliably measured. Otherwise, such expenses are recognised as costs on an ongoing basis. Development that is entered on the balance sheet is depreciated on a straight line basis over the financial lifetime. Research expenses are recognised as costs on an ongoing basis.
Tangible fixed assets are entered on the balance sheet and depreciated on a straight line basis over the asset's expected lifetime. Major assets that consist of significant components having different lifetimes are depreciated with different depreciation times for the different components. Direct maintenance of equipment is recognised continuously as an expense under operating expenses, while increased costs or improvements are added to the equipment's price and amortised concurrently. If the recoverable value of the asset is lower than book value, it is written down to recoverable value. Recoverable value is the higher of net sales value and value in use. Value in use is the present value of the future cash flow that the asset is expected to generate.
Subsidiary and associated companies are assessed by the cost method in the company accounts. The investment is valued at acquisition cost for the shares unless write down has been necessary. Write down to fair value is been done when the decrease in value is due to causes that cannot be considered to be transitory and where this must be considered necessary according to good accounting practice. Write downs are reversed when the reason for write down no longer exists.
Dividends, group contributions and other payments from subsidiaries are entered as revenue during the same year as provision is made for them in the subsidiary's accounts. If the dividend/group contribution exceeds the proportion of earned profit after the date of acquisition, the surplus represents part repayment of invested capital and is deducted from the value of the investment on the parent company's balance sheet.
Trade accounts receivable and other receivables are recognised in the balance sheet at their nominal value after deductions for provision for expected loss. Provision for losses is made on the basis of individual assessment of each debt.
Short-term investments (shares assessed as current assets) are valued at the lower of acquisition cost and fair value on the date of balance. Dividends received and other payments from the companies are entered as other financial income.
The company has collective, contribution-based pension schemes. These are schemes with a savings portion and a risk portion with earnings right. Pension premiums are entered as costs as they occur.
Defined-benefit pension schemes
Defined-benefit pension schemes are valued at present value of the future pension benefits that have been earned on the date of balance. Pension funds are valued at fair value.
Changes in defined-benefit pension commitments that are due to changes in pension plans are distributed over the estimated average remaining earnings period. Estimate changes and changes in financial and actuarial assumptions (actuarial gains and losses) are entered against equity (OCI). The period's net pension costs are classified as payroll and personnel costs.
The cash flow statement has been prepared according to the indirect method. Cash and cash equivalents comprise cash, bank deposits and other short-term liquid investments.
In accordance with the company specification under note 15, a total of NOK 102.2 million is operating income from our subsidiaries. Total Norwegian operating income amounts to NOK 48.4 million, Swedish NOK 53.1 million and Danish company NOK 0.7 million.
Tax effect of temporary differences and carried forwards giving rise to delayed or deferred tax advantages, specified on types of temporary differences:
|Other short-term liabilities consist mainly of accrued costs not yet due for payment.|
The company's equity capital financing consists of a long-term credit facility maturing in June 2020, in addition to short-term credit facilities in the banking systems. The long-term loan agreement was entered into June 2016 and comprises two drawing frames of NOK 850 million and SEK 750 million respectively. The agreement initially had 3 years' maturity, with the option to request an extension of 1 year up to 2 times during the first 2 years of the agreement. In the second quarter of 2017, the first of these two options was used and the maturity of the agreement was changed from June 2019 to June 2020. Any decision to request further extension of the agreement will be made in the course of March / April 2018.
The loans have been taken with negative security declaration and have normal clauses relating to equity, equity ratio and debt ratio.
In addition to the long-term access to liquidity, the group has loan facilities that are renewed each year. As at 31.12.2017 these were NOK 312 million. As a result of normal seasonal variations, the group's net interest-bearing debt was at its highest in March 2017, NOK 1,159.9 million. The long term loan facilities as at 31.12.2017 will cover liquidity needs for the coming two and a half years.
Assets with associated financial market risk consist of loans in foreign currency to subsidiaries, mainly in SEK. Exchange rate exposure is eliminated in that the loans are financed with debts in the same currency. Interest rate risk connected with the same receivables and liabilities is reduced by using rate swaps. In order to assist subsidiaries in covering risks associated with buying and selling currency, and within limits defined by the Board, currency positions are taken for internal exchanges. The company also carry out the the hedging of the Group's consumption of electricity. For the Swedish part of the Group this is done through trading financial contracts on the Nasdaq OMX Commodities. The realized hedging income is allocated to subsidiaries according to consumption, resulting in no net impact for Moelven Industrier ASA.
Shares in subsidiaries are assessed with regard to indications of impairment. Net reversal of impairment of cost amounts NOK 3 mill. In addition, a provision made in 2016 for risks on loans and guarantee obligations to group companies with NOK 62,4 mill have been reversed following a settlement agreement.
The company has no restricted bank deposits. The company's cash credit accounts are included in the group's account systems. The company can thus be collectively responsible for more than the company's withdrawals. The employees' tax deduction funds are secured with guarantees furnished by an external credit institution.
The following types of hedging are used:
Rate swaps, currency future contracts, structured forward buying of currency, future contracts for electric power. Hedge accounting is not used.
Profit before tax
The Group has no hedging instruments not traded in functional markets. Fair value is calculated based on observable market prices for similar instruments.
Presentation of nominal value and duration of financial instruments
There is not given any loans or guarantees to the company management.
See note 28 to the consolidated accounts for fixing of salary and other benefits for group management.
The company is obliged to have an occupational pension scheme pursuant to the Act on Mandatory Occupational Pensions. The pension scheme complies with the law requirements, and is better than the minimum requirements in the law. With regard to defined-benefit pension schemes the company is still subject to taxable collective annuity scheme liabilities for a limited number of individuals.
All obligations related to previous AFP schemes has ceased. Remaining uncecured schemes are related to other guaranteed obligations applicable to a limited number of people.
A new AFP scheme from 01 January 2011 for the Group's Norwegian companies
The new AFP scheme which came into force in 2011 is defined as a defined-benefit multi-company scheme, but is entered as a defined-contribution scheme until reliable and sufficient information enabling the companies to account for its proportionate share of pension costs, pension obligations and pension funds in the scheme. The company's obligations related to the new AFP scheme is therefore not recorded as a liability.
For information regarding developments in share capital, summary of shareholders, shareholder agreements and closely related parties, shares owned by members of the board of Directors, corporate assembly and group management, declaration on fixing of salary and other remuneration to group management and also remuneration to the board of directors and corporate assembly, see notes 27, 28 and 29 to the consolidated accounts.